How Publishers Will Beat Amazon

April 17, 2012

How Publishers Will Beat Amazon

Companies that have existed for centuries could be gone in a generation unless they make a single radical change.

Physical books don’t have DRM - so why should their digital equivalents?

Publishers who want to stay in business are going to have to start selling books without digital rights management, says science fiction author Charlie Stross. DRM locks customers into individual ebookstores and devices, which is the primary way that Amazon perpetuates its stranglehold on this market.

For AMZN, the big six insistence on DRM on ebooks was a windfall: it made the huge investment in the Kindle platform worthwhile, and by 2010 Amazon had come close to an 85% market share in the ebook sector (which was growing at a dizzying compound rate of 100-200% per annum, albeit from a small base). And now we get to 2012, and ebooks are likely to hit 40% of total publishing sales by the end of this year, and are on the way to 60% within five years (per Tim Hely Hutchinson, CEO of Hachette UK). In five years, we’ve gone from <1% to >40%. That’s disruption for you!

As an author, it’s theoretically in Stross’s interest to maintain the DRM business as usual. But he argues, and I think recent history is on his side, that “the real driver for piracy is the lack of convenient access to desirable content at a competitive price.”

As one of only two publishers who have decided not to settle with the DOJ in its case against them (the other is Penguin), Macmillan is now in a unique position: It’s a large, profitable company that is willing to experiment, but also inherently conservative precisely because of its success.

I single out Macmillan because – full disclosure – I collaborated on new projects with the then-head of Macmillan US when I was an editor at Scientific American. It strikes me as exactly the sort of organization that is teetering on the edge of being the first do do the radical thing that’s required to save itself – namely, eliminate DRM from its ebooks and therefore destroy the Monopsony that Amazon will otherwise cement.

When I wrote last week that I didn’t think it particularly mattered whether or not Amazon became an e-book monopoly, because straight text is the most platform-independent kind of content in existence, I forgot that we still live in a world in which books purchased from Amazon can only be read on Amazon’s devices and apps.

It’s abundantly clear that publishers that survive in an Amazon world will be those who disrupt Amazon itself. If Amazon’s aim is to “cut out the middleman” then the next logical step is for publishers to cut out the middleman that is Amazon.

Stross lays it out in stark terms:

And so [publishers] will deep-six their existing commitment to DRM and use the terms of the DoJ-imposed settlement to wiggle out of the most-favoured-nation terms imposed by Amazon, in order to sell their wares as widely as possible.

If they don’t, they’re doomed.

There is one other outcome that is possible, and unfortunately for existing publishers, I think it’s the most likely: New publishing companies will spring up that are willing to publish books sans DRM. This will lead to (some) piracy but will also return to these companies the power to price their wares as they see fit. These companies will also, incidentally, not be saddled by the legacy costs of existing publishers. And in this way companies that have existed for centuries will be radically transformed – or else cease to exist.